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Published on April 22, 2008

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Seoul Health Forum 2005 Medicines Cost-Effectiveness Provisions in Bilateral Trade Agreements: Threats or Facilitators to Global Public Goods?:  Seoul Health Forum 2005 Medicines Cost-Effectiveness Provisions in Bilateral Trade Agreements: Threats or Facilitators to Global Public Goods? Dr Thomas Faunce BA/LLB(Hons) B Med PhD Senior Lecturer Medical School and Law Faculty Project Director, Globalization and Health, Centre for Governance of Knowledge and Development, RegNet, Australian National University Overview of Presentation:  Overview of Presentation Discussion of importance of scientific cost-effectiveness analysis of pharmaceuticals (CEAP) as a global public good Direct threats to CEAP focused on “innovation” agenda: Annex 2C of AUSFTA, US Dept of Commerce Study of OECD Price Controls Indirect threats: “TRIPS-Plus” IP provisions in bilateral trade agreements (no export under patent, no parallel importation, restricted compulsory licensing, “evergreening” notification to TGA before generic market entry, increased data exclusivity Prospects for CEAP Committee in bilateral trade agreements (including South Korea and Canada) Cost-Effectiveness Analysis of Pharmaceuticals:  Cost-Effectiveness Analysis of Pharmaceuticals Began with Ontario, British Columbia and Australia’s PBAC in approx. 1993 Used for perhaps longer as part of WHO Essential Medicines List Expert reviewers consider hierarchy of published evidence of new drug against comparitors May or may not be directly related to a price negotiation Cost-Effectiveness Analysis of Pharmaceuticals:  Cost-Effectiveness Analysis of Pharmaceuticals Utilised by most OECD countries Only US has legislative prohibition against CEAP (at Federal level) May or may not involve reference pricing (positive and negative lists) A global public good: ensures government money is wisely spent on pharmaceuticals proven to offer genuine benefit over existing therapies Challenges: 1. Lobbying for Pharmaceutical Innovation:  Challenges: 1. Lobbying for Pharmaceutical Innovation WHO Essential Medicines List: few are innovative. 18% of the R&D budgets of PhRMA’s members allegedly goes to discovering “breakthrough” drugs (but few NME’s in the pipeline). Costs of producing an ‘innovative” medicine are unknown. Industry does not reveal marginal cost of production Most is spent on making minor (“me-too”) variations to existing, profitable “developed-nation-disease” medicines. Pharmaceutical company profits, after R&D costs have been removed, are conservatively estimated to be three to four times the profits of other US companies. R Laing B Waning, A Gray et al, 25 Years of WHO Essential Medicines List: Progress and Challenges (2003) 361 Lancet 1723-1729, Families USA, Out of Bounds: Rising Prescription Drug Prices for Seniors. Washington DC 2003. National Institute of Health Care Management, Prescription Drugs and Intellectual Property Protection. Washington DC (2000). Pharmaceutical Innovation:  Pharmaceutical Innovation To sustain a 15% annual growth rate a pharmaceutical company needs to discover 8-9 new molecular entities (NMEs) each year (10% growth rate needs 5-6 NMEs and 5% growth rate 2-3 NMEs) Current industry average is 0.5 NME’s per year Evergreening of brand name blockbuster patents provides an alternative (multiple techniques) and keeps out generics Large claims made for health benefits of “innovative” medicines but no binding post -marketing outcomes agreements are entered into by industry Last two factors effect CEAP Challenges: 2. TRIPS Agreement:  Challenges: 2. TRIPS Agreement Convention on Trade Related Intellectual Property Rights An initiative of Industry CEOs, including PhRMA Uses trade sanctions to enforce higher intellectual property standards, includes NVNB provision Doha Declaration on TRIPS and Public Health But Article 4 MFN: any advantage in private rights obtained by a WTO member by bilaterals must “immediately and unconditionally’ be passed on to all other members (Professor Drahos’ IP-Ratchet) Challenges: 3. AUSFTA and CEAP:  Challenges: 3. AUSFTA and CEAP The Australian-United States Free Trade Agreement(“AUSFTA”) entered into force 1 January 2004 First such bilateral US Trade Deal to include specific provisions on a developed nation’s pharmaceutical reference pricing (CEAP) system (chiefly Annex 2C, but also indirectly Ch 17 on intellectual property) Changes facilitate industry lobbying: greater government reimbursement spending on brand name rather than generic drugs, reduced roles for generic drugs post brand name patent expiry, reduced CEAP and more DTCA US Trade Negotiators’ Statutory Obligation to Seek the“Elimination”of Australia’s CEAP Pricing System :  US Trade Negotiators’ Statutory Obligation to Seek the“Elimination”of Australia’s CEAP Pricing System Medicare Prescription Drug Improvement and Modernization Act 2003 21 U.S.C conference agreement Trade Act 2002 (US), 107-210 §2102 (b) (8) (D). Slide10:  AUSFTA, Annex 2C on Pharmaceuticals. Interpretive Principles The Parties are committed to facilitating high quality health care and continued improvements in public health for their nationals. In pursuing these objectives, the Parties are committed to the following principles: a)the important role played by innovative pharmaceutical products in delivering high quality health care b)the importance of research and development in the pharmaceutical industry and of appropriate government support, including through intellectual property protection and other policies Slide11:  c)the need to promote timely and affordable access to innovative pharmaceuticals through transparent, expeditious, and accountable procedures, without impeding a Party’s ability to apply appropriate standards of quality, safety, and efficacy; and d) The need to recognize the value of innovative pharmaceuticals through the operation of competitive markets or by adopting or maintaining procedures that appropriately value the objectively demonstrated therapeutic significance of a pharmaceutical But CEAP Benefits from AUSFTA Definition of Pharmaceutical Innovation:  But CEAP Benefits from AUSFTA Definition of Pharmaceutical Innovation Pharmaceutical innovation defined for the first time in the context of: 1) High quality health care and continued improvements in public health 2) Affordability 3) Objectively demonstrated therapeutic significance AUSFTA Innovation and Australasian Pharmaceutical Policy:  AUSFTA Innovation and Australasian Pharmaceutical Policy Annex 2C (3) requires Australian TGA to liase with US FDA about making “innovative” medicines more speedily available This could, given novel AUSFTA affordability definition of innovation, facilitate arguments for CEAP in US AUSFTA “Evergreening” Notification Provision :  AUSFTA “Evergreening” Notification Provision Article 17.10.4: “Marketing approval” by TGA of Generic Drug must be “prevented” when any type of patent is “claimed” by a brand-name manufacturer Appears textually to cover only prescription medicines, but has been interpreted by Australia’s TGA to cover over-the-counter and herbal medicines Market approval by the TGA will be refused by TGA unless applicant puts on a certificate notifying TGA that it has done a patent search and can certify no patents are being breached or has notified the barn-name patent owner NOT a TRIPS obligation The Various Shades of Evergreening:  The Various Shades of Evergreening Classic “Hatch-Waxman” Linkage Evergreening (as imposed on Canada after NAFTA in 1993). Brand name company gets notification of impending generic entry and puts on injunction gaining extra patent life Cluster multiple (100’s) patents around each molecule covering active compound, uses , delivery systems Licensing agreements with generic companies (or take-overs) Advocate price reductions by generics to reduce their profit margins Patent mixes of drugs (aspirin with statins, or link each drug prescription to a genetic test) Australian Anti-Evergreening Amendments to TGA Notification Process :  Australian Anti-Evergreening Amendments to TGA Notification Process THE ANTI_EVERGREENING AMENDMENTS New 26B requires notice by generic to brand name mfg and certificate that brand name patents not infringed (implementing article 17.10.4 AUSFTA) New 26C of TGA:brand name manufacturer must lodge certificate if contesting generic entry New 26D TGA: brand name mfg must give notice of injunction against generic to Cth Att-Gen who can join and claim damages for losses to the PBS from delayed generic entry arising from the injunction. Challenges: 4. US Study of Reference Pricing Systems in OECD Countries:  Challenges: 4. US Study of Reference Pricing Systems in OECD Countries US Dept Commerce Study Commissioned by Medicare Prescription Drug Improvement and Modernisation Act (2003) Includes France, Germany, UK, Greece, Japan, Switzerland, Canada, New Zealand, Australia Plan to dismantle CEAP pricing systems in these countries and make their medicines prices rise to higher US benchmark No scientific backing to show this makes sense in terms of overall public health or fiscal responsibility Being followed up by upcoming OECD meeting in Paris 2 December Response: Pharmaceutical Cost-Effectiveness Analysis Committee in Trade Bilaterals:  Response: Pharmaceutical Cost-Effectiveness Analysis Committee in Trade Bilaterals Proactive: Facilitate regulatory co-operation Work towards gold standard of CEAP Ensures long term improvement of important government fiscal lever and global public good Complements work towards global R&D Treaty Responsive: Protects from multinationals agenda on innovation Agenda of Trade Agreement CEAP Committee:  Agenda of Trade Agreement CEAP Committee Commercial in confidence discussion Marginal cost of production discussion Sharing of evaluations and experts Clinical trials register Binding outcomes agreements (conditional listings) Transparency discussion Capacity building Trade in services aspect Public interest regulation of merging brand/generics market Conclusion:  Conclusion CEAP is an endangered global public good Advantages in a CEAP Committee in trade bilaterals, such as South Korea-Canada bilateral Long term movement toward a CEAP multilateral treaty as a valuable efficiency measure for governments

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